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CS Professional · Corporate Restructuring, Valuation and Insolvency · Overview of Business Valuation

Kaveri Auto Components Ltd has been loss-making for years, and its board has resolved to wind up and sell its plant and machinery item by item over six months to find the best price. A valuer is engaged to value the plant for this purpose. Which premise of value best fits this assignment?

Liquidation value on an orderly basis fits best. The company intends to sell its assets piecemeal rather than continue, and six months gives reasonable time to find the best price. A forced sale premise would assume a compelled, hurried disposal, which is not described here.

  1. AGoing concern value of the entire enterprise
  2. BLiquidation value on an orderly basisCorrect
  3. CLiquidation value on a forced sale basis
  4. DReplacement value as a continuing business

Explanation

The assets will be sold piecemeal, so a liquidation premise applies. The six-month period allows reasonable marketing time, so it is orderly rather than forced. A forced sale would assume a very short, compelled sale window, which is not the case.

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